Your task in this question is to evaluate the effects of the Affordable Care Act, which was designed to increase coverage to 32 million Americans, on the labor market. Specifically, your task is to evaluate each component below and identify, first, what effect the policy will have on employment and wages, and second, whether those effects are efficient or not, using our usual definition of efficiency. This question is about efficiency, not redistribution. What this means is that you do not have to decide if the subsidies offered are a good idea or not. The Affordable Care Act
Individual Mandate:
Everyone must purchase health insurance or face a $325 per person annual fine (or 2% of your income). There are some exceptions for low-income people.
Employer Mandate:
Employers with more than 50 employees must provide health insurance or pay a fine of $2000 per worker. (It's actually a little more complicated than this, but assume that this is the provision.)
Insurance Reforms
Insurance companies cannot deny coverage to anyone with preexisting conditions.
Health Insurance Exchanges:
The uninsured and self-employed would be able to purchase insurance through state-based exchanges with subsidies available to individuals and families with income between the 133 percent and 400 percent of poverty level.
Separate exchanges would be created for small businesses to purchase coverage.
Paying for the Plan:
Medicare Payroll tax on investment income -the Medicare Payroll Tax will be expanded to include unearned income. That will be a 3.8 percent tax on investment income for families making more than $250,000 per year ($200,000 for individuals).
Excise Tax - Beginning in 2018, insurance companies will pay a 40 percent excise tax on so- called "Cadillac" high-end insurance plans worth over $27,500 for families ($10,200 for individuals). Dental and vision plans are exempt and will not be counted in the total cost of a family's plan.